Kyeryong Construction Industrial's (KRX:013580) Conservative Accounting Might Explain Soft Earnings

The market for Kyeryong Construction Industrial Co., Ltd.'s (KRX:013580) shares didn't move much after it posted weak earnings recently. We think that the softer headline numbers might be getting counterbalanced by some positive underlying factors.

View our latest analysis for Kyeryong Construction Industrial

How Do Unusual Items Influence Profit?

To properly understand Kyeryong Construction Industrial's profit results, we need to consider the ₩16b expense attributed to unusual items. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And, after all, that's exactly what the accounting terminology implies. If Kyeryong Construction Industrial doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Kyeryong Construction Industrial.

Our Take On Kyeryong Construction Industrial's Profit Performance

Because unusual items detracted from Kyeryong Construction Industrial's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think Kyeryong Construction Industrial's earnings potential is at least as good as it seems, and maybe even better! On the other hand, its EPS actually shrunk in the last twelve months. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. For instance, we've identified 4 warning signs for Kyeryong Construction Industrial (2 are concerning) you should be familiar with.

This note has only looked at a single factor that sheds light on the nature of Kyeryong Construction Industrial's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. Some people consider a high return on equity to be a good sign of a quality business. While it might take a little research on your behalf, you may find this free collection of companies boasting high return on equity, or this list of stocks that insiders are buying to be useful.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.